MERIT HOSPITALITY SERVICES PRIVATE LTD.

The Applicant is registered as “Outdoor Caterers” under the GST Act. It is providing snacks and food for breakfast, lunch, evening tea and dinner to the employees of various companies. The food is prepared at their own kitchen and it is distributed to various companies at different locations. The Applicant is carrying on its business under 4 different situations:

Case I: The Applicant supplies food at company premises. The distribution of the food is directly done by the staff of company. The menu and the material specifications are mentioned in the contract and also the rate for various items are pre-determined between Merit Hospitality and the company. The billing is done by Merit Hospitality directly to the company on monthly basis and payment is received from the company as per the terms of payment mentioned in the contract.

Case II: In addition to supply of food on the request of the client Merit Hospitality Services Pvt. Ltd. also undertake the services of distribution of food for which Merit Hospitality raises separate bill charging 18% GST/SGST.

Case III: The employees of ‘A’ Ltd. have formed “Employees Co-op. Society" which is running canteen for employees of A ltd. The contract of supply of food of Merit Hospitality is now with “Employees Co-op. Society ” and not with “A ” Ltd.

Case IV: The Merit Hospitality has entered into a contract with a company “B” Ltd. who is having its unit in SEZ area. The supply of food is done by Merit Hospitality to the employees of “B ” Ltd. and payment for the same is made by the employees of “B ” Ltd. directly to Merit Hospitality.

The Applicant sought Advance Ruling on following questions:

1. Whether the supply of food be called as canteen activity and the applicable rate of 5% be charged on bills?

2. Whether both the activities together i.e. supply and distribution of food be called as canteen activity and the applicable rate of 5% be charged on bills?

3. Whether contract of supply of food with Employees Co-op. Society can still be claimed as canteen activity and the applicable rate of 5% be charged on bills?

4. a) Can Merit Hospitality claim that since the food is supplied directly to SEZ area hence no GST is applicable ? or

b) Can Merit Hospitality claim that it is running a canteen in SEZ area hence no GST is applicable? Or

c) Can Merit Hospitality claim that it is running a restaurant in SEZ area and hence applicable GST rate is 5% only?

The present situation is related to supply of food and Beverages to another company. This activity falls under the outdoor catering. The notification 11/2017 Central tax (Rate) vide entry No.7(v) specifically mentions “Supply by way of or as part of any service or in any other manner whatsoever in outdoor careering wherein goods, being food or any other article for human consumption or any drink ( whether or not alcoholic liquor for human consumption), as a part of such outdoor catering and such supply or service is for cash, deferred payment or other valuable consideration.

The activity cannot be considered as canteen activity as the dealer is in the business of supplying food and beverages to the company on the basis of agreement and hence it is purely outdoor catering service  taxable under Serial No. 7 Heading 9963 (v) @ 18% under GST as applicable.

Further the undertaking of additional responsibility of services of distribution of food by the applicant would in no way impact the classification or taxability of the services.

The Employees Cooperative Society running the canteen themselves would in no way impact the catering transaction with the applicant. Now instead of the company A Ltd., the outdoor catering services are being provided to the Employees Cooperative Society which would be taxable @ 18% only.

The benefit of zero rated supply as per Section 16(1)(b) would be allowed only when supply is to SEZ developer or a SEZ unit only in respect of authorized operations. If it is not covered under authorized operations then this supply of food by the applicant to SEZ employees would not be eligible for the benefit of zero rated supply.

Further the applicant cannot claim that they are running a canteen in SEZ. Rather their service would be in the nature of outdoor catering service

CRUX: 1. The activity is related to supply of food and Beverages to another company. It is purely outdoor catering service  taxable under Serial No. 7 Heading 9963 (v) @ 18% under GST.

2. Distribution of food alongwith supply of food in no way impact the classification or taxability of the services and are taxable as outdoor catering service  taxable under Serial No. 7 Heading 9963 (v) @ 18%.

3. The applicant is providing  the outdoor catering services to Employees Cooperative Society instead of the company A Ltd hence taxable as outdoor catering service under Serial No. 7 Heading 9963 (v) @ 18%.

4. a) Due to lack of submissions whether B Ltd. is authorised unit in SEZ and regarding authorised operations of SEZ the said question cannot be answered.

b) The applicant cannot claim that they are running a canteen in SEZ. Rather their service would be in the nature of outdoor catering service 

c) The service supplied by the applicant cannot be claimed as restaurant service rather it is outdoor catering service hence taxable @ 18%.